Taxing Death

Doesn’t the government get enough during your lifetime? I understand the initial sentiment behind the death tax. It was put in place to try and stop dynasties from forming. Advocates looked at generational wealth in Europe and wanted each generation to be put at the same starting line.

But, trying to be “fair” never works. The Koch brothers kids will always have advantages over mine. The great thing about the US is it doesn’t matter. My kids can be just as successful as the Koch kids if they create something.

Did the creator of Spanx come from a silver spoon background? No. She went to Florida State and was the daughter of an artist and lawyer.

The problem is, you will never put anyone at the same starting line with anyone else. That’s why the Constitution and Bill of Rights read as they do. Every human has “inalienable rights”. It doesn’t mean Sam and Joe start the human race with exactly the same amount of assets. Life isn’t a board game.

States are beginning to understand this. Citizens are leaving their state to avoid the tax. The other problem they are having is as one generation dies, the next is being forced to liquidate productive businesses to pay the death tax. This hurts local economies.

The Tennessee tax really does cause the rich to flee. The authors found that in 2010 Florida had nearly twice as many federal tax returns with taxable estates (per 100,000 population) as did Tennessee. The average estate is also larger in Florida—$7.4 million versus $4.4 million in Tennessee.

There is a reason they call Florida “God’s waiting room.”

The tax has been useless at avoiding the creation of dynasties. Anyone ever wonder how Joe Kennedy made a boatload of money and the third,fourth and fifth generations of his estate don’t seem to have a problem with money at all? Wealthy people hire really good tax and insurance guys to help them avoid the death tax problem. Then they die in the correct state.

It’s hard to build a fortune. Why should the government be entitled to a piece of it?

The Wall Street Journal has a great in depth editorial on the issue this morning. You ought to read it. Along with death taxes, I would advocate repealing dividend taxes and even a lot of corporate taxes since corporation never pay them anyway. They either avoid them, or aggregate them. Consumers always pay in the end.